Vattenfall Capital Markets Day 2009 Presentation by: Hans von Uthmann Senior Executive Vice President Head of Business Group Nordic Amsterdam, 23 September 2009
Contents Overview Business Group Nordic Key issues and challenges Making electricity clean Hydro and biomass Managing cash-flow in tougher business environment Increased customer base Change in base power Nordic market Summary and conclusions 2
Overview Business Group Nordic Board of Directors Chief Executive Officer Group Shared Service Group Functions Business Group Nordic Business Group Central Europe Business Group Benelux Business Group Pan Europe Wind Nuclear Engineering Generation Distribution Sales Mining & Generation Transmission Distribution Germany Distribution Poland Sales Poland Heat Poland Exploration & Production Power, Heat & Services Sales Trading Heat Sales Germany Services Heat Germany Shared Service Centres 3
Overview Business Group Nordic Business Group Nordic comprises Vattenfall s operations in Sweden, Finland and Denmark. Business Units: Generation, Distribution, Sales, Heat and Services. Electricity generation is primarily based on hydro power. 2008 Operating profit (EBIT), MSEK 11,461 Electricity generation, TWh 42.1 - of which, hydro power 35.5 - of which, fossil-based power 6.1 - of which, biomass 0.5 Heat sales, TWh 10.4 Employees 5,642 Electricity customers (million) ~1.1 Network customers (million) ~1.3 4
Making Electricity Clean BG Nordic Vattenfall Group El. Generation Road Map TWh 350 300 250 200 150 100 50 0 2010 2015 2020 2025 2030 Wave Wind Biomass Hydro Gas Coal Coal CCS Nuclear CO2 base case g/kwhel 600 500 400 300 200 100 0 Low CO 2 emitting The goal for the Nordic operations is to become climate-neutral until 2030 88% of electricity generation in BG Nordic comes from low CO 2 - emitting energy sources (hydro and biomass) 38% of heat sales in BG Nordic comes from biomass and waste Vattenfall is continuously upgrading its plants to increase the share of biomass and reduce the share of fossil fuels 5
Managing cash-flow in tougher business environment Nordic energy intensive industry is currently under pressure Approx. 20 TWh (5%) drop in demand on the Nordic market Impacts electricity prices Electricity price risk is the risk that has the single greatest impact on Vattenfall s earnings Vattenfall is taking actions to protect and manage cash-flow Review of asset portfolio: Divestment of two minority holdings in AB PiteEnergi (purchase price SEK 238 million) and Luleå Energi AB (purchase price SEK 312 million), completed Continuous work on improving efficiency and managing cost (OpEx programme) 6
Customer base increases both in retail and B2B Despite weaker demand in the Nordic region, Vattenfall has signed several new long-term contracts with industrial customers In total Vattenfall has 126 TWh contracted with powerintensive industry for the period 2012-2022 Latest large contracts are with companies Hydro, Hustadmarmor and Stora Enso Continuing growth in retail customer base, currently over 1 million customers in total First contract with physical delivery in Norway signed (Pilkington) 7
Changes in Base Power given full implementation of renewables directive Nordic region: Changes in Base Power 2008 2020: 55 TWh Increased electricity consumption: 1 TWh Sweden 28.2 TWh Finland 13.0 TWh Wind 13.1 Hydro 1.7 Nuclear power upgrading 8.3 Natural gas CHP* 1.3 Biofuel CHP* 4.8 Coal/oil CHP* -1.0 Wind 5.8 Hydro 0.6 CHP* 2.3 Nuclear 12.4 Decommissioning of coal condensing units -8.1 Norway 15.7 TWh Denmark -1.9 TWh Wind 8.1 Natural gas 1.4 Hydro 6.2 Wind 7.1 Decommissioning of coal condensing units -15.9 CHP, condensing 6.9 * District heating and back-pressure generation 8
Export potential of low CO 2 -emitting power Political pressure for renewable energy sources Excess supply Export potential Current transmission bottlenecks Significant expansion of transmission capacity to surrounding markets is needed North European grid expansion plan needed Ongoing implementation of EU s 3rd directive for the electricity market and the establishment of ENTSO-E provides necessary prerequisites to fulfil such a plan 9
Summary and conclusions BG Nordic 33% of Group EBIT in first 6 months 2009 low emitting base load portfolio Taking actions to manage cash-flow Customer base increasing and customer relations improving New potential export possibilities for CO2 free electricity 10
Back-up 11
Key data BG Nordic H1 H1 % FY Amounts in SEK billion 2009 2008 Change LTM 2008 Net sales External net sales * EBIT * 22.2 24.5 6.3 20.8 24.0 6.9 6.7 1.9-9.4 39.8 48.9 10.8 38.4 48.4 11.5 Net assets ** 106.8 105.0 1.7 -- 123.0 Electr. generation, TWh Heat sales, TWh 20.3 6.4 23.2 5.9-12.5 8.5 39.2 10.9 42.1 10.5 Employees *** 5,624 5.674-0.9 -- 5,642 * Excl. intra group transactions ** At the end of the period *** Full time equivalents (FTE) 12
Vattenfall in the Nordic countries Vattenfall is the largest electricity generator on the Nordic market with 23% market share Sweden: 82.7 TWh electricity generation 4.0 TWh heat sales Finland: 1.0 TWh electricity generation 1.6 TWh heat sales Denmark: 7.0 TWh electricity generation 4.7 TWh heat sales 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 397, 5 TWh 14 M Cust. 14 M Cust. 116 TWh Others Helsingfors PVO DONG E.ON Statkraft Fortum Vattenfall Others Statkraft DONG E.ON Vattenfall Fortum Others Statkraft Helsingfors E.ON DONG Vattenfall Fortum Others PVO E.ON Helsingfors Vattenfall DONG Fortum Generation (TWh) Distribution (Cust.) Sales (Cust.) Heat (TWh) 13
Regulatory update Sweden A government study on Third Party Access of the district heating market has been postponed and will probably not be finalised until 2011. New regulatory framework for electricity distribution is under way Finland Decision in principal to introduce windfall profit tax on old hydro- and nuclear power in 2010. Denmark Increased subsidies for biomass and wind power introduced 14
Inv. decided Decided and planned transmission projects No Project MW Year 1 2 Great Belt 600 2010 Fennoskan 2 800 2012 1 3 Skagerakk 4 600 2014 4 Den-Ger 1000 2015 5 South link 1100 2016 6 West link 1100 2016 7 6 2 10 9 7 Internal Nor AC 2016 8 Great Belt 2 600 2018 16 3 5 11 1 12 8 14 4 15 2 9 Fin Rus 1100 2014 10 11 Estlink 2 Nor-Ger 650 2016 700 2016 12 Nordic-Baltic 700 2017 13 Den-Ned 700 2022 14 Den-Ned 700 2018 15 Kriegers flak 1100 2018 16 Nor-Uk 2x700 2022 15